The price of money next year in terms of money this year is expressed as __________ .
The price of one unit of money payable next year in today's money is \(1/(1+i)\), where \(i\) is the nominal interest rate. Investing this present amount at the nominal rate…
Choose your answer
The price of money next year in terms of money this year is expressed as __________ .
Answer and explanation
Correct answer D
The price of one unit of money payable next year in today's money is , where is the nominal interest rate. Investing this present amount at the nominal rate produces one unit next year. A real interest rate instead adjusts for changes in purchasing power.
Practice for these exams
-
Maharashtra and Goa SET (MH SET)